The Treasury Department published new final “issue price” regulations that will become effective for bonds sold on or after June 7, 2017. The method whereby issue price is determined is significant because issue price is used to compute the yield on an issue of tax-exempt bonds. Generally, the higher the issue price, the lower the bond yield and vice versa. The Final Regulations provide more clarity and guidance for issuers and underwriters and predominantly retain the existing rules that have been in place for public sales of bonds. However, for negotiated public offerings of bonds, the long-standing practice of relying on an underwriter’s reasonable expectation as to the offering prices of bonds has been replaced with a stricter rule based on actual sale prices, and industry practices will need to be adjusted to conform to these new requirements.
A copy of the Final Regulations can be found here.
Posted: Dec 21, 2016